Developing islamic financial system in Malaysia

Islamic finance has made major inroads into worldwide financial markets, gaining widespread
recognition. Islamic finance is today practised in over 60 countries, with a strong presence in Muslim
countries. Malaysia's Islamic financial system is both stable and rapidly expanding in terms of
financial infrastructure. Islamic banks, investment banks, takaful firms, development financial
institutions, savings institutions, fund management companies, stock brokers, and unit trusts are
among the market's many players.

1.Inception stage (1983-1993 Year)

- Building foundation of legal, regulatory and Shariah framework such as instituting foundations of
Islamic finance and financial inclusion.

- Tabung Haji 1963 develop first to ensure muslim can save their money for haji expenses and make
sure money that saving were free from riba in oreder to attain a Mabrur Haji.(perbadanan wang
simpanan bakal haji) (PWSBH) opened counter to collect deposit from The prospective Hajj Pilgirms
and were taught to save in Shariah-compliant organisation to prepare for their Hajj. In 1995 , Tabung
Haji upgrade their main activities suach as hajj management, depository services and investment.

- Islamic Banking Act 1983 was incorparated as Malaysia’s first Islamic bank. BIMB was given a grace
period of 10 years to operate without competition, to protect its growth and development. Over the
period 1983 until 1993 achieved an average growth rate 48%. Enactment of the government
investment (GIA) 1983 ia enable the issuance of government paper and bonnds. Government
investment certificate (GIC) initially offered on the basis of qard hasan bit subsequently changed to
bay al-inah.

- Takaful Act 1984 were develop for setting up of takaful companies , to complement the operations
of Islamic banks.

- Government Funding Act 1983

2.Intermediate stage (1993-2001 Year)

-This stage are more focus to inncrease number of players,develop financial markets and enhance
Shariah governance, such as Institutional building, stimulate competition, activity generation and
market vibrancy.

-Islamic window

-1994 establishment of Islamic Interbank Money Market. In 1999 Bank Muamalat Malaysia Berhad,
is Malaysia second full-fledged Islamic bank was incorporated.

-In 1993 second establishment Islamic bank. The Dual implemented, allowing Islamic and
conventional banking to co-Exist and run concurrently in the financial system. Islamic Banking
scheme(IBS) introduced, which allowed conventional to offer Islamic Banking windows.

-second establishment takaful company

- BNM established its Shariah Advisory Council (SAC) on Islamic Banking and Takaful 1997 to streamline
and harmonize the Shariah interpretations among banks and takaful companies. The SAC is the highest
authority in deciding Shariah issues pertaining to Islamic banking and takaful operations in Malaysia.

- KLSE Islamic Index was introduced

3.Advance Stage (2001- 2010 Year)

- For this stage development more focus on market liberalisation, upgrading infrastructures,
strengthen overall Islamic finance landscape such visioning, comprehensive and international
integration.

-FSMP- 10 year roadmap

-Foreign Islamic Banks

-Islamic Subsidiaries

-New takaful and retakaful licences

- Tax neutrality policy

-IBFIM is a lifelong learning institution which specialises in industry technical certifications. The
certifications are designed to ensure attainment of technical proficiency levels to fulfil jobs
requirement and support professionalisation of the industry. IBFIM key programmes are developed
based on IBFIM Qualifications Framework and are accorded Full Accreditation by the Finance
Accreditation Agency to maintain the quality and provide progressive career route for the certificate
holders.

-SIDC is the leading capital market learning and development solutions provider for industry
participants in Malaysia and the growth and emerging markets that include market professionals,
company directors and regulators. Established in 1994 as the learning and development arm of the
Securities Commission Malaysia (SC) and incorporated in 2007, SIDC has been a standard-bearer of
quality and innovation for over two decades.

-INCEIF was set up by Bank Negara Malaysia in 2005 and has been mandated to develop and nurture
talent and experts in the Islamic financial services industry. As a university, INCEIF offers
postgraduate studies in Islamic finance.

-ISRA was established in 2008 by the Central Bank of Malaysia as an Islamic finance and Shariah-
related research institution. ISRA is recognised globally as a leading global premier research academy
in the Islamic finance industry and has garnered numerous accolades.

-BNM Act 2009 is an Act to provide for the continued existence of the Central Bank of Malaysia and
for the administration, objects, functions and powers of the Bank, for consequential or incidental
matters.

2011 and beyond

-Increase diversity of [players and instruments, enhance dynamics of the financial markets, enhance
financiallinkages with other jurisdictions.Focus more to enhanced internationalisation of Islamic
finance.

- Financial Sector Blueprint -international of Islamic finance

-Islamic Financial Services Act